The Australian sharemarket bolted out of the opening blocks along with other Asian markets and hit a fresh five-year high after Lawrence Summers, the odds-on favourite to become the new US Federal Reserve chairman, withdrew his candidacy.
Mr Summers is considered a monetary policy “hawk” that would likely raise interest rates earlier than current deputy chairman Janet Yellen, the earlier runner for the role.
The Fed post is considered crucial in underpinning global market sentiment, especially as the Fed contemplates scaling back its quantitative easing program this week, and Dr Yellen offers the type of policy continuity favoured by financial markets.
The S&P/ASX index rose 0.7 per cent at its peak, but eased back to close 28.4 points, or 0.54 per cent, at 5248 points on volume well below average as investors stayed on the sidelines ahead of the Fed policy announcement on Wednesday night.
The Australian dollar leapt 0.8¢ to US93.30¢ on the news, while government 10-year yields tumbled 10.4 points to 3.983 per cent after US treasury yields fell 16 points to 2.80 per cent.
“Perceptions that a Summers-led Fed would more quickly exit unconventional policy settings than one led by Yellen has offered support to the US dollar in recent weeks, and these moves are now in the throes of being unwound,” National Australia Bank global head of currency strategy Ray Attrill said.
Sentiment was also buoyed after agreement was reached between the US and Russia on a plan to dismantle Syria’s chemical weapons capability, but US retail sales data missed forecasts on Friday and consumer confidence tumbled, underscoring the delayed impact from the surge in global borrowing costs since May.
The Shanghai composite index was marginally higher at the close of the ASX
Japanese markets were closed for a public holiday.
Gold bounced $US20 to $US1330 an ounce, copper rose 0.6 per cent to $US7080 a tonne and on Friday spot iron ore lost 0.5 per cent to $US134.50 a tonne.
The broader All Ordinaries index was up 27.0 points, or 0.52 per cent, at 5,241.7. On the ASX 24, the September share price index futures contract was 25 points higher at 5,253, with 82,877 contracts traded.
Wall St provided decent leads over the weekend, but RBS Morgans senior private client adviser Bill Chatterton said he thought investors were more confident now that the election had provided a decisive result.
Prime Minister-elect Tony Abbott’s comments about getting to work methodically rather than radically rebuilding things were giving investors and business confidence, he said.
Most sectors posted solid gains.
Newcrest Mining jumped 61 cents, or 5.1 per cent, to $12.63 despite falls in the gold price over recent weeks.
Mining giant BHP Billiton added 7.0 cents to $36.27 and Rio Tinto gained 32 cents to $63.40.
Among the major banks, National Australia Bank was the standout, gaining 57 cents to $34.10, ANZ gained 8.0 cents to $30.35, Commonwealth Bank lifted 23 cents to $74.05 and Westpac was 4.0 cents higher at $32.13.
Westfield Group rose 12 cents, or 1.1 per cent, to $10.96 after the global shopping mall giant sold seven US malls to American private equity company Starwood Capital Group for $US1.64 billion ($A1.76 billion).
National turnover was 1.24 billion securities worth $3.1 billion.